Thursday, July 26, 2007

A combination of a strong Canadian dollar vis-à-vis the U.S. dollar and modest GDP growth will help keep Canadian interest and mortgage rates low over the remainder of this year and in 2008. One, three and five-year posted mortgage rates are forecast to be in the 5.75 - 6.75, 6.00 - 7.00, and 6.25 - 7.25 per cent ranges respectively over the rest of this year and in 2008.

Mortgage rates have moved slightly higher so far this year and are expected to drift-up modestly in the first half of 2008. However, while mortgage rates won’t increase much, higher house prices will push mortgage carrying costs higher. This will ease housing demand, particularly for first-time buyers.

MLS price growth will remain strong in 2007 at 9.6 per cent, pushing the average price to nearly $303,500, reflecting continued price pressures in western Canada. In 2008, the average MLS price will reach about $318,400, an increase of 4.9 per cent.Source: CMHC - www.cmhc.ca

Most buyers are first time home buyers

Most Intending to Buy a Home in 2007 are First-Time Home BuyersAccording to CMHC’s newly released Renovation and Home Purchase Report - Major Market Highlights, a large share of intenders will be first time buyers.

Close to half (48 per cent) of purchase intenders will be first time buyers with the majority of first time buyers between the ages of 25 and 34, with a household income between $80,000 to just under $100,000.

How do home buyers intend to finance their future purchase? Over half of potential home buyers are planning to make a down payment of less than 25 per cent of the expected value of their purchase. The main sources of down payment funds are household savings for 37 per cent of potential home buyers, while equity from the present/previous residence is also a popular option with 27 per cent.

Housing Starts Decrease in JuneThe seasonally adjusted annual rate of housing starts was 225,500 units in June, down from 235,200 units in May. “Following a significant increase in May, the volatile multiple segment lost most of the ground it gained in June,” said Bob Dugan, Chief Economist at CMHC’s Market Analysis Centre. “Although housing starts will remain high in 2007, they are expected to resume a gradual decreasing trend. This is confirmed by the single detached component, which is slightly below the levels of the last two years.”Want to read more about housing starts? Visit http://www.cmhc.ca/en/corp/nero/nere/2007/2007-07-10-0815.cfm